What is special about the Amazon service FBA and what experience do sellers have with it?
“My Amazon FBA experience: I sell with FBA and earn €20,000 a month! Now I will show you how to build a successful business.” – You have probably read one or another promising headline like this from self-proclaimed Amazon gurus. But do these Amazon FBA experience reports reflect reality? The question of whether Amazon FBA is worth it is one that many who are involved in e-commerce or are considering building their own online business on Amazon ask themselves.
No one can deny that Amazon FBA offers many advantages for sellers. However, remain critical and beware of exaggerated success stories that are abundant on the internet. What we can say in advance is: Yes, you can make money with Amazon FBA, but it requires a lot of know-how and you need to consider certain aspects. From experience, Amazon FBA is by no means a “get-rich-quick-overnight” model! In this sense, we will show you the most important advantages and disadvantages of Amazon FBA and what experiences other sellers have had with the fulfillment service. So: Get ready, friends, and enjoy reading!
What is Amazon FBA and how does it work?
Amazon FBA (Fulfillment by Amazon) is a service where the seller can outsource all logistics such as storage, packaging, shipping, returns, and customer service. Amazon takes care of all this for you. For a fee, of course. Nevertheless, sellers can reach a much larger number of customers through automatic participation in the Prime program – and with less effort.
To start as an Amazon FBA seller, you must first send the selected items you want to sell to one of Amazon’s fulfillment centers. This can be done through chosen carriers, or you can have Amazon organize this process. In the next step, the products are listed including the “Prime” logo. Now, the orders placed through Amazon are completely processed by Amazon. The picking from the warehouse, packaging in boxes, and shipping is done exclusively by Amazon. If there are any issues with the orders, Amazon also takes care of customer service and the return of returned goods. Therefore, customers usually have a good experience with Amazon FBA, even if they may not be aware that their order was shipped using this service. The profit earned, minus all fees, is transferred by Amazon to the seller’s registered business account.
Is every seller and every product suitable for Amazon FBA?
Amazon FBA is generally open to all marketplace sellers (with a few exceptions). However, it should be noted that storage fees are based on the required storage space and the duration of storage. Especially for larger products, FBA can therefore impact the margin and even become unprofitable. Thus, products that represent a larger purchase for the customer and are bought less frequently may also be less attractive. In general, we recommend conducting a thorough and extensive product research to get a clear picture of the situation or even to catch some trending products.
Furthermore, Amazon points out in the guidelines that products that fall under the following four criteria may indeed be excluded from the fulfillment program or generally may not be offered. This may somewhat dampen the Amazon FBA experience of some entrepreneurs.
Categories requiring approval: This refers to categories such as food, which are monitored, controlled, and possibly regulated by Amazon. According to Amazon, this is to ensure customer safety, quality, any trademark rights, and the legal requirements of import and export.
Products with restrictions: This includes, for example, prescription medications, as these are legally excluded from sale. Also, nicotine-containing tobacco products or used vehicle parts are restricted by Amazon’s guidelines.
Hazardous goods: Items with hazardous components that pose a risk to health may not be sold through Amazon and therefore may not be distributed through Amazon FBA.
Improper packaging: Packaging that does not comply with Amazon’s requirements may also lead to exclusion from the FBA program. In this context, Amazon refers to a safe and efficient packaging quality that is manageable in the logistics centers.
An alternative to Amazon FBA is dropshipping. Both shipping methods have advantages and disadvantages. We have looked at which fulfillment is suitable for whom: Amazon FBA vs. Dropshipping.
The most significant advantages: This is what Amazon FBA sellers report from experience
Logistics made easy
If you have ever sold something on the e-commerce platform, you may know how tedious it is to search for the product in your home warehouse, pack it, and then take it to the post office. Manual shipping is extremely time-consuming and exhausting. Instead, sellers who use Amazon FBA can leverage the experience and the personnel and material capacities of the online giant.
Huge storage capacities are available
With Amazon FBA, you theoretically have unlimited free storage capacities, as you utilize Amazon’s gigantic fulfillment centers and do not have to invest in complicated logistics. No more full garages where you lose track and have to shuffle things around. Goodbye space problems! You only pay for the space you actually use. The storage fee is based on the average daily storage volume in cubic meters per month. There is a distinction between the off-peak season (January to September) and the peak season (October to December). The peak season is a bit more expensive, but it can be assumed that you will also generate more revenue during this time. Amazon offers an official FBA calculator to provide sellers with more calculation security. Because ultimately, it is not only important whether other Amazon sellers have a good experience with FBA – the financial aspect must also be right!
Shipping by Amazon
By handling the shipping and having established contracts with major carriers such as DHL, Hermes, and UPS over the years, Amazon has significantly reduced shipping costs. On the other hand, Amazon offers a fast and cost-effective alternative to the aforementioned parcel delivery services with its own delivery service. For the customer, fast and reliable shipping means an additional purchasing argument for your product.
Management of returns
Dealing with returns and upset customers is tedious. For all FBA sellers, Amazon takes care of the unpleasant part, from inspecting the returned products to handling all subsequent tasks – you don’t have to worry about anything anymore.
However, a small fee is charged for processing returns, which is based on the amount of work involved. Generally, this fee is low and is therefore worthwhile for the seller. However, please note that Amazon is known to be very accommodating with FBA products and also accepts returns that you might not have accepted. You can find all important information about the Amazon A-to-Z Guarantee here: The Amazon A-to-Z Guarantee: Between Sales Genius and Return Madness.
Access to top-notch customer service
Amazon provides customers with comprehensive customer service, which Amazon FBA sellers can thus delegate to the e-commerce giant. 365 days a year and 24 hours a day, customer service is active worldwide on behalf of FBA sellers. There is a direct messenger chat, email support, and a telephone service. Smaller sellers can usually not afford this on their own, as the personnel resources are insufficient or outsourced teams are often too expensive. This significantly improves the shopping experience for the customer, and you can differentiate yourself somewhat from the competition that prefers to handle their fulfillment themselves or has outsourced customer support.
Prime status increases performance
Probably one of the most significant advantages is that 70% of customers with Prime status shop on Amazon multiple times a week. In contrast, only about 27% of non-Prime customers are on Amazon that often. This is a considerable advantage for Amazon FBA sellers. From experience, it is also not uncommon for customers to filter by the status “Shipped by Amazon” – thus, the visibility of FBA products is significantly increased. While there is also the possibility for sellers without FBA to sell with Prime status, they must first qualify and prove that they can meet the high logistics standards. This is usually not feasible for many smaller sellers.
The most significant disadvantages: This is what Amazon FBA sellers report from experience
As positive as the advantages for Amazon sellers are, you also need to weigh some disadvantages of the Amazon FBA offering. However, the size of the barrier for sellers can vary greatly from case to case.
Advertising is only possible to a limited extent
While advertising on the marketplace itself is not a problem, using a custom shipping box or including flyers and similar items is not permitted. Amazon FBA products are shipped in packaging with the Amazon logo, thus providing no clues about the actual sellers. This prevents any communication with the customer – including advertising materials. Each seller must decide for themselves whether they want to obscure their own brand’s communication and take full advantage of Amazon’s brand power or whether a heightened brand awareness among their customers is more important to them.
Too high costs
With Amazon FBA, experience has also shown that, on one hand, costs can be seen as an advantage, while on the other hand, they can also represent a significant disadvantage for the seller, as they must be set in relation to the profit margin (this should always be done). If the sales of the product are very low and the logistics costs are too high, nothing is left in the end. Amazon FBA sellers often just sell without much thought. The problem for many sellers is that they have not properly calculated costs such as FBA fees, storage and packaging costs, and later costs for reorders. Therefore, sufficient starting capital should be available to address any potential problems.
Amazon FBA: Experience shows that the competition is immense!
Building your own business in online retail is relatively labor-intensive compared to Amazon FBA. But even an FBA business is no walk in the park, as sellers are subjected to the tough demands of the Bezos corporation. The initial excitement has worn off, and most realize that it takes a lot of work and some expertise to make money long-term with Amazon FBA.
On one hand, the ever-increasing competition that settles on the marketplace is one of the challenges for FBA sellers. Additionally, Amazon as a superpower actively participates as a seller itself. Furthermore, a large portion of the offered merchandise is now sold by multiple sellers, and the competitive pressure continues to rise. Accordingly, the so-called Buy Box is also becoming increasingly difficult to acquire with Amazon FBA, according to experience.
Now let’s be clear: Is Amazon FBA still worth it?
Now you have all the relevant information on this topic. However, one question remains: Is Amazon FBA worth it for you or not? Most companies and specialists answer this question with an enthusiastic “Yes, of course!”
The correct answer is more like: “It depends.”
If you sell on Amazon full-time, you will not be able to avoid using FBA. The time savings alone and the increased Buy Box opportunities for those selling merchandise clearly speak in favor of using Fulfillment by Amazon. But how can you get the most out of this concept?
At the end of the day, it doesn’t matter whether you sell merchandise or your own brand. The fact remains that it is extremely difficult nowadays to find a new product that is not already sold on Amazon. There are simply many people selling all kinds of products and specializing in all conceivable niches. On the other hand, there have never been as many online shoppers as there are today. And here’s the catch: all these potential customers are looking for the same thing. Namely, a good product accompanied by a perfectly seamless customer experience.
The keyword here is “customer experience.”
A flawless product is practically a basic requirement. But the perfect customer experience – beautifully referred to in English as “Customer Journey” – is not so common and sticks in people’s minds just as much as the quality of the product.
Of course, with Amazon FBA, you lose the opportunity to have direct contact with your customers. After all, Amazon takes care of that for you. However, you can use the time gained from this to work on your listing, for example. You can have high-quality photos taken of your products, improve your product descriptions, or work on your pricing strategy. Especially on a huge platform like Amazon, it is ultimately the unique selling points that encourage purchases.
So, is Amazon FBA worth it for you? It depends. How can you prove to customers that your shop is better than the competition? Do you have the better price? Are you selling an extremely practical bundle? Are your images simply more beautiful than those of the competition and do they convey the feeling that the product transfers to the person just by scrolling on a smartphone?
Well-executed, these are exactly the factors that make Amazon FBA worthwhile. Those who sell mediocre products without FBA will – even with Amazon FBA – have to experience continued mediocre sales.
The problem with FBA errors
Even Amazon makes mistakes during fulfillment. FBA errors are difficult to identify manually or require a very high effort. FBA sellers on Amazon often forfeit a lot of money from experience when they do not claim their entitled refunds. Typically, there is a lack of knowledge and the necessary time to manually analyze every little detail, compile the necessary reports, and interpret errors. SELLERLOGIC makes FBA errors visible and supports you in preparing the data, documenting the cases, and the tedious communication with Amazon. Use the unique tool now: SELLERLOGIC Lost & Found.
Conclusion: Amazon FBA – Experience from users of the program
Amazon FBA sellers receive some exclusive advantages over other marketplace sellers, such as significant ease of work, fast and smooth shipping through Amazon’s fulfillment centers, and the associated cost savings, as there are no rental or potential construction costs for a private warehouse. Thus, an e-commerce business can be built with relatively low startup capital in comparison.
However, there are also some disadvantages that Amazon FBA brings from experience. The seller loses the opportunity to directly contact customers by transferring the entire fulfillment to Amazon. Additionally, Amazon makes mistakes as well, and sellers who do not take care of their refunds can unknowingly lose a lot of money.
Experience has shown, however, that with good preparation, particularly by accurately calculating the incurred costs and weighing opportunities and risks, nothing stands in the way of a profitable and successful Amazon FBA business, and high profits can be achieved. Bad experiences with Amazon FBA, as one reads in many forum posts, have been made by every seller at some point. The motto here is “Keep a cool head.”
Image credits in the order of the images: © Mike Mareen – stock.adobe.com / Screenshot @ Amazon / © photoschmidt – stock.adobe.com / © Mike Mareen – stock.adobe.com
